Nickel the One Export Success Story in a Struggling Cuban Economy

On balance Cuba isn’t having a great time. True nickel prices are doing okay and production at the country’s principal mines is doing well. The largest, Pedro Soto Alba plant, is a joint venture with Sherritt International of Canada and hit a monthly record in February producing 106 tons daily while a second plant state-run by Cubanickel was just 2% above plan at 76 tons. The Holguin province, where the nickel mines and processing facilities are located on Cuba’s northern coast were hit by a Category 3 Hurricane Ike in Sept 2008 causing extensive damage. According to a Reuters article, while Cuba sits on proven reserves of some 800 million tons of nickel plus cobalt and another 2.2 billion tons of probable reserves, some 34% of the world’s total, it is only about 8th in the world in terms of production. Furthermore, output has been static for the last decade or more. So much for communism, most of Cuba’s exports go to China but due to the US trade embargo against Cuba the most obvious market for the country’s nickel exports is closed to them.

Likewise, exports of Cuba’s other traditional international commodities such as sugar and cigars are also flat. Cuba was once the world’s largest sugar producer.   When Fidel Castro came to power in 1959, he promised to rid the country of its dependence on a single crop for its export revenue. He succeeded with that strategy.   By 1990, sugar accounted for 90% of export revenues and the state presided over 156 sugar mills most of them expropriated from American corporations when the communists came to power 156 miles of railways to transport product and half the island’s arable land. Today sugar accounts for just 5% of exports. Only 60 mills are working and 20 are due to close soon. Likewise coffee production has fallen from 60,000 tons in 1960 to 6,000 tons last year and citrus output is down 40% from a decade ago according to an article in the FT.

It’s possible the contraction of the Cuban cigar industry however has more to do with a world wide spread of smoking bans than the failures of the communist regime. Cuban hand rolled cigars still dominate the premium cigar market with some 70% of sales outside of the USA, but the land put aside for growing is shrinking every year and inventory of leaf and finished cigars are said to be high. Exports are down to $218m in 2009 from $243m in 2008 although domestic sales are said to be as strong as ever but they are a fraction of export prices. The world can live without Cuban sugar and could get by without Cuban nickel but it would not be quite the same without Cuban cigars.

–Stuart Burns

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